Sources of business finance Quiz-1

The Financial Institutions are established by:

• Both State and Central Govt.

• State Govt.

• Central Govt.

• Municipal Corporation

Answer explanation

Financial Institutions are established by both State and Central Govt. This ensures a strong regulatory framework and coordination between the two levels of government.

Companies generally invite public deposits for a period up to:

• 5 years

• 4 years

• 3 years

• 10 years

Answer explanation

Companies generally invite public deposits for a period of 3 years. This is the correct choice.

Which source of finance is preferred by investors who want fixed income at lesser risk

• Debentures

• Equity shares

• Preference shares

• Bank loan

Answer explanation

Investors who want fixed income at lesser risk prefer debentures as a source of finance.

Which type of funds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period

• Foreign currency convertible bonds

• ADR

• Equity shares

• GDR

Answer explanation

Foreign currency convertible bonds are equity linked debt securities that can be converted into equity or depository receipts after a specific period.

Financial institutions aim at promoting the industrial development of a country, these are also called ?

• Development banks

• Rural banks

• urban banks

• None of the above

Answer explanation

Financial institutions that promote industrial development are called development banks. They provide funding and support to industries for their growth and expansion.

Preference shareholders are called :

• Partners of the company

• Owners of the company

• Executives of the company

• Guardians of the company

Answer explanation

Preference shareholders are the owners of the company.

Retained earnings is also known as:

• Residual owners of the company

• Loan capital of the company

• Short term capital of the company

• Ploughing back of profits

Answer explanation

Retained earnings, also known as ploughing back of profits, refers to the practice of reinvesting profits back into the company for future growth and expansion.

Which one of the following is not the feature of preference shares:

• Provides fixed rate of return

• Provides voting rights

• Get Preference over equity shares

• Part of owner’s capital

Answer explanation

Preference shares do not provide voting rights.

Short term funds are those funds which are required for a period not exceeding:

• Three years

• Two years

• One year

• Five years

Answer explanation

Short term funds are funds required for a period not exceeding one year. This makes the correct choice 'One year'.

Which of the following denotes the feature of Indian Depository Receipt :

• It is issued only to American citizens

• It is purchased and sold only by NRI's

• It is traded in American Stock Exchange

• It is issued to Indian citizens only

Answer explanation

Indian Depository Receipts are issued only to Indian citizens, not to American citizens, NRI's, or traded in American Stock Exchange.